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Dry bulk profit props up K Line results

News31-Jul-18

Japan’s K Line has reported a modest profit of JPY40M (US$360,000) in the dry bulk segment in the quarter ending 30 June, after making a loss of JPY140M in the same period last year.

K Line Woodchip Carrier FORESTAL GAIA

Operating revenues totalled JPY6.46B, up from JPY5.76B a year earlier.

“Despite temporary market rate fluctuations, the market recovered on the whole in the dry bulk segment because of an improvement in the vessel supply/demand balance due to a recovery in cargo movements and the easing of pressure from the supply of new ships,” the company stated in its results announcement.

“In the Capesize sector, the average market rate in the five major services temporarily rose above US$20,000 per day due to a recovery in cargo movements of iron ore from Brazil, which had been sluggish because of the effects of unfavourable weather conditions and the breakdown of equipment at the beginning of the year.

In the medium and smaller vessel sector, market rates in the transatlantic and trans-Pacific services temporarily widened as a result of a fall in the Atlantic market rates, caused by the continued sluggishness of grain shipments from South America in April.

“However, recently, Atlantic market rates have recovered to a level close to Pacific market rates, and the average market rate in the five major services has also stayed above US$10,000 per day.

“Scrapped vessel capacity continued to decline year-on-year, but the pressure from the supply of new ships was limited, so market rates generally stayed steady. In the dry bulk business, the group strove to reduce operation costs and improve vessel allocation efficiency. As a result, the overall dry bulk shipping segment recorded year-on-year growth in revenue and returned to profitability from loss in the same period of the previous fiscal year.”

K Line’s overall results were by the container business segment. Overall revenues fell by 26.2% year-on-year to JPY21.22B, leading to a JPY1.71B loss.

“The financial results of the Ocean Network Express, which started business in April, and whose results are reflected in the company’s results in accordance with the company’s equity ownership ratio, deteriorated compared with the initial plan because of lower-than-expected handling volume and providing clumsy services in the initial stage right after service start-up and a rise in bunker prices on the expenditure side,” stated K Line.

“The container ship business that has remained with the company after the business integration recorded a year-on-year decline in revenue and loss, mainly as a result of one-time expenses related business transition being higher than forecast.”